S&P credit ratings were mixed in '92

January 12, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Reflecting the poor state of the world economy and a mild pickup in the United States, companies and governments got mixed credit ratings in 1992, and the situation is not expected to improve much this year, analysts from Standard & Poor's Rating Group said at their annual meeting yesterday.

"There are some signs of optimism. With the United States, the situation is improving, but overseas remains weak," S&P Ratings Group President Leo C. O'Neill said.

In 1992, 492 ratings of U.S. corporate debt, worth $383 billion, were downgraded. Another 252 ratings, representing $126 billion, were upgraded.

This represented an improvement over 1991, when $504 billion in debt was downgraded.

By contrast, $122 billion of debt from foreign institutions was downgraded, compared to $1.7 billion being upgraded. Foreign downgrades represented 32 percent of all corporate downgrades, up from 19 percent in 1991.

S&P's ratings of companies' and governments' creditworthiness is considered an indication of the economic outlook because the group studies the health of all major U.S. and foreign companies as well as of U.S. state and local governments.

The agency affirms, downgrades or upgrades a company's credit rating, which is used by investors who might want to buy the organization's bonds.

The most pessimistic part to S&P's outlook was overseas, where Japanese banks and the electronics and automobile industries have been especially hard hit.

In another sign of the global slump, cross-border acquisition activity declined in the second half of 1992, according to a study released yesterday by KPMG Peat Marwick. International mergers and acquisitions totaled $72.6 billion last year, a 30 percent increase over 1991's record low but far below 1989's $130 billion.

The S&P study also showed that the trend toward lower ratings for industrialized countries also continued, with only four countries now enjoying a top AAA rating.

On the positive side, several developing countries, such as Indonesia and Thailand, reached investment-grade ratings for the first time.

Among the sectors of the U.S. economy doing fairly well were industrials, which recorded near parity between downgrades and upgrades. Still suffering from the economy was the insurance industry, in which only one company was upgraded, vs. 25 downgrades.

U.S. city governments were among the brighter performers, with $47.8 billion in debt downgraded vs. $31.3 billion in debt upgraded. In 1991, by contrast, there were four times as many downgrades as upgrades.

The downgrades were also localized, with recession-plagued New York, California and Illinois accounting for half the downgrades.

Government debt in Maryland has been stable over the past year.

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